By Lilly Milman

The Skagway Borough has received its first sales tax return from Amazon, which started collecting tax on many of its orders delivered into Alaska communities, including Skagway, on Jan. 1. The amount of tax collected is not public record, as sales tax returns are confidential, the same as an individual’s federal tax return. 

Amazon filed its first-quarter sales tax return with the borough on May 15. At that time, the company did not have a municipally issued business license, which is required in Skagway, but has since started the application process to obtain a license, said Borough Treasurer Heather Rodig. 

Dealing with out-of-state online merchants is new to Alaska consumers and municipal sales tax offices. 

Unlike Wrangell, Haines and several other Alaska municipalities that have begun amending their sales tax code to explicitly cover online merchants to ensure full collection under the law, Skagway has not taken any such steps. 

A U.S. Supreme Court ruling in 2018 in South Dakota vs. Wayfair (a nationwide online retailer of home goods) lifted a longstanding limitation on states that wanted to require online merchants to collect and remit sales taxes. The court affirmed that states can require merchants to collect sales tax even if they have no physical presence in the state.

The ruling did not explicitly address municipal sales 

taxes, but several Alaska cities and boroughs reported that their residents started to see taxes on their orders this year — and the municipalities want to ensure that the tax is charged correctly and turned in to the public treasury. 

Due to scheduling conflicts, Skagway did not send a representative to a meeting on online sales tax collections organized by the Alaska Municipal League (AML) in Anchorage on June 6. Mayor Andrew Cremata is planning to follow up with the organization at a later date, Rodig said.   

Because Alaska does not have a state sales tax, each municipality has its own set of tax codes, exemptions and definitions, making it difficult for online sellers like Amazon to know the details of each code to accurately collect and remit sales tax. The AML and its members are looking into setting up a new organization to serve as a middleman between municipalities and online retailers to ensure efficient and accurate tax collections by sellers nationwide. 

Participation in the new AML-created entity would be voluntary for cities and boroughs. 

Haines and Wrangell have already taken steps to ensure that their treasuries receive taxes from online sales and that that the businesses correctly follow local code. Both communities sent representatives to the AML meeting and have revised their sales tax codes to explicitly state that online merchants have to collect the tax on goods delivered into the community, even if the merchant is based outside the community.   

Wrangell Borough Finance Director Lee Burgess said the borough made several changes in its tax code to include language related to online sales tax collection after legal advice based on the Supreme Court ruling. Burgess anticipates Wrangell will make further changes to its tax code as AML moves ahead with its effort.    

Only one online vendor had sent in a sales tax return to Wrangell as of mid-June, Burgess said, though are at least two or three others have been charging the tax but had not filed tax returns to his knowledge.   

“It’s difficult for a small staff to contact all of these corporations, or even find contacts for them.” Burgess said. “It can be a full-time job for someone chasing down all of these companies.”  

Haines has not had an issue with remittance from online vendors, said Haines Borough Finance Director Jila Stuart. The borough has received taxes collected by Amazon, Overstock.com, Netflix and Sling TV, plus others, Stuart said. All of these companies have business licenses in town.   

The Haines borough, same as Wrangell, decided to amend its tax code to fully cover online retailers, as suggested by the borough attorney.   

Collecting sales tax from online purchases benefits Skagway because the funds allow the municipality to provide public services for its citizens, Cremata said. 

Skagway resident Mark Schaefer, in a March 4 letter to the borough, said it is a matter of fairness: “While we all enjoy tax-free online sales, it is our duty to contribute to our local sales taxes. It is unfair competition to our local businesses for online retailers to not pay the same tax. I, like many others, do a lot of online shopping usually because of availability of products, not to avoid paying sales tax.”